1. Suppose the average annual penalty is $10,000 for reckless drivers and $1,000 for careful drivers. If half of an insurance company’s insured drivers are reckless, the company will earn zero...

1. Suppose the average annual penalty is $10,000 for reckless drivers and $1,000 for careful drivers. If half of an insurance company’s insured drivers are reckless, the company will earn zero economic profit if the price of insurance is $
 . If careful drivers are not willing to pay any more than $4,000 for insurance, the price required for zero economic profit is $
 .

2. Arrows up or down: In an insurance market, the presence of high-cost consumers
  the average cost of providing insurance. The resulting
in the number of low-cost consumers

the average cost of providing insurance and
price.

3. The Genetic Information Nondiscrimination Act (GINA) protects people from genetic discrimination in

insurance, but not in
 insurance. (Related to Application 3 on page 651.)